Severe or gentle bankruptcy law: Which impact on investing and financing decisions?

This research investigates how legal sanctions prevailing under bankruptcy may impact on debt contracting and on investing decision. We model firms having the opportunity to engage (or not) faulty management. In case of default, the firms may escape costly bankruptcy by reaching a private agreement with the bank. We show that such renegotiation process may depend on the level of severity of bankruptcy law.

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Year of publication:	2013
Authors:	Blazy, Régis ; Deffains, Bruno ; Umbhauer, Gisèle ; Weill, Laurent
Published in:	Economic Modelling. - Elsevier, ISSN 0264-9993. - Vol. 34.2013, C, p. 129-144
Publisher:	Elsevier
Subject:	Corporate bankruptcy \| Credit lending \| Interest rate \| Moral hazard \| Legal sanctions

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Type of publication:	Article
Classification:	G33 - Bankruptcy; Liquidation ; D82 - Asymmetric and Private Information ; D21 - Firm Behavior
Source:	RePEc - Research Papers in Economics

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